For capital gains and interest, on articles 12 and 14 for USA - Netherlands tax treaty, USA capital gains and interest income is re-sourced as Dutch so that US citizens residing in Netherlands can claim a foreign tax credit.
However, IRS also states: "This rule does not apply to income that is re-sourced by reason of the relief from double taxation rules in any U.S. income tax treaty that is solely applicable to U.S. citizens who are residents of the foreign treaty country. "
Does that mean, one should classify the income as passive income instead, which seems incorrect.
The end result of taxes will be the same, since you will claim a foreign tax credit either on taxes paid on passive income or on re-sourced income, but the filing itself is different.
Furthermore, how does this apply with dividends on the US-NL treaty where the re-sourced income is only the income that generates over 15% taxes?